Arthur Goldstuck's Networkers at Cisco Live! keynote

Fleishman Hillard invited me to attend the Networkers at Cisco Live! event. I was accredited as part of the media and attended Arthur Goldstuck‘s keynote presentation on his organisation’s latest report. I thought I’d share some of the highlights of the keynote from my perspective.

There has been a 16% increae in internet and access service providers in the last year. The sheer number of service providers points towards a pretty highly fragmented industry, a “new Wild West”. There are also a considerable number of unlicensed and unregistered service providers who stay under the radar, relying on ICASA’s inability to monitor them. These service providers point to a huge demand for access to the Internet.

Another significant trend is that despite the growth of ADSL (anticipating about half a million subscribers by the end of 2008), wireless broadband is more prevalent with an anticipated 750 000 subscribers by the end of the year. This includes the cell networks, iBurst and Neotel. Interestingly, about a third of 3G users use that service as a backup connection to ADSL. For the time being ADSL remains dominant although next year we can expect to see wireless broadband overtake it. A significant shift in this space will come when Telkom develops a more intensive wireless broadband solution which Goldstuck expects to see in 2009.

This year there are just over a million broadband subscribers and this is a substantial increase over last year. In contrast dial up has followed a typical adoption curve and is dropping away so fast it is not really feasible to offer it. Existing users are expected to migrate and new users shift into broadband directly. This mirrors a similar trend in the United States a few years ago.

Increased ADSL use by SMEs contributed around 300 000 users to the ADSL userbase in 2008. In contrast corporate adoption was constant in 2008.

What interests me most at the moment is mobile Internet use. Only about 4% of mobile users see their mobile device as their primary Internet access device. 11% os mobile users see their device as a backup device. Mobile access added about 200 000 users to the total userbase.

Internet access adoption, generally, is boosted by new developments in Internet access so we see an increasing growth of Internet access. The total number of Internet users will likely double by 2013 to around 8 million users.

Of course access to the Internet doesn’t mean people run their lives online. It takes roughly 5 years for people to start using higher level services and applications on the Web (services like e-commerce, online banking etc). This is what Goldstuck calls the “experience curve”. This experience curve is flattening and it means that we will see an intensification of Internet use by existing users until around 2013 or so when Goldstuck expects to see the experience curve kick in again. It all translates into a positive outlook for Internet growth.

An underlying problem is that the “have-nots” are not being brought on board. This growth only really benefits the “haves”. Goldstuck commented that the have-nots are left with inadequate devices and this stifles their adoption. I am not sure I agree with this and see a huge role for netbooks and cheaper mobile Internet devices. Colin Daniels was sitting with me and he sees devices like netbooks become powerful entry level devices. Improvements in free software like Ubuntu should play a powerful role in facilitating this because it means cheaper, easy to use devices. I asked Goldstuck about this and he said that, in his view, cost and literacy issues mean that these devices won’t make a substantial difference in the next few years. Usability is potentially another a barrier to adoption by the “have-nots”.

A big barrier to growth is the data cap system we are forced to accept. The new undersea cables are expected to increase data caps and drop prices dramatically. I agree with Goldstuck when he said that data caps, certainly at current levels, are “inappropriate” for an developing economy.

On the lighter side my favourite soundbite was Goldstuck’s comment that managed liberalisation has become the telecoms version of AIDS denialism. Love that!

I was also invited to attend a media Q&A with the media. I was given a copy of Goldstuck’s presentation and a press release with highlights from the report. To start with Rudolph Muller took issue with my comment about netbooks and made the point that netbooks won’t make a dent in accessibility because they are more costly than laptops. They simply haven’t been designed with developing markets in mind. Colin Daniels took a contrary view and acknowledged that the price point is an issue but it is a matter of time before these devices become cheaper. He feels the government should sponsor these devices and help address the cost. Goldstuck pointed out that widespread distribution of these devices will require a form of public works program to achieve this, assuming it works.

I asked Goldstuck about the possibility of a leap over laptops and similar devices to smarter, Internet enabled mobile devices which may be more accessible by the have-nots. He made the point that subsidies from mobile networks won’t assist the majority of mobile phone users who tend to use pay as you go. He also said the cost of smartphones is still an issue and the majority of users will stick with lower end devices. That being said a leap frog remains a possibility in the medium term.

Upgrades to available bandwidth when new cables land will likely see mobile broadband costs drop. We could see prices as low as 8c per MB from the Telkom and Neotel although the mobile networks may still charge higher prices than this for their mobile data on the basis of higher transmission costs and a cost for the convenience of a mobile connection. I hope not but we will have to see.

Interesting piece of information: the rate of adoption of Telkom’s fixed line connections has dropped for the 7th year in a row since its peak in 2001. It has effectively disconnected all its customers which it connected to meet its license requirements.

Uninet’s model for townships could be a model for Telkom. Uninet provides wifi phones and Internet connections to township residents at low rates and still make a good profit because of the sheer number of users.